Canceling rent for coronavirus would cause ‘cascade effect’: International Capital Group CEO
International Capital Group CEO Adiel Gorel reacts to demands to cancel or freeze rents across the country.
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In just a few weeks, for the third time since the U.S. locked down its economy to slow the spread of the novel coronavirus, monthly rent for millions of Americans is due.
But, unlike the previous two times, there will no longer be guardrails in place against evictions for some renters who are unable to pay their rent as a result of the outbreak of the virus.
Texas and Wisconsin were among the majority of U.S. states that issued temporary eviction moratoriums earlier this year. But at the end of May, those bans expired, leaving the fate of renters who cannot pay their bills up in the air. Similar moratoriums in Arizona, Colorado, Hawaii, Tennessee and Nebraska are set to lift at the end of May.
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"We anticipate that there will be a tsunami of evictions filed," Dana Karni, an attorney with Lone Star Legal Aid, which provides free legal representation to low-income Texans, told NPR. "I have no doubt about it, we are going to see homelessness."
Although there’s a federal moratorium on evictions in place through the end of July, it only applies to rental properties with federally backed mortgages. An estimated 28 percent of rental properties nationwide are protected by the moratorium. Several banks, including JPMorgan Chase and Wells Fargo, have agreed to halt foreclosures and temporarily waive mortgage payments for borrowers whose finances have been impacted by the outbreak.
At the end of April, the American Civil Liberties Union sent letters to state officials across the country urging them to extend the moratoriums and prevent mass evictions.
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“As millions of people lose their jobs as a result of the COVID-19 pandemic, renters are faced with the added threat of being put out of their homes or cut off from access to utilities during a global pandemic,” Sandra Park, an ACLU attorney, said in a statement.
As the financial pain inflicted by the coronavirus pandemic deepens — in the past two months, 38.6 million Americans have joined the unemployment roll, the fastest pace recorded since the Great Depression — tenants and advocates have called for rent strikes and lobbied for massive government intervention as a housing crisis looms.
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A recent survey found the virus outbreak has affected the income of nearly two-thirds of all renters. Just 52 percent of respondents expected to be able to pay their full rent in May, compared to 69 percent who indicated they paid April’s rent in full, according to Grace Hill, a company that develops technology for the property management industry.
Rent and mortgage payments are typically the largest monthly expense for Americans: One in four tenant families pays more than half of its income in rent, a rate that’s even higher in cities like San Francisco and New York, according to Harvard’s Joint Center for Housing Studies.
The issue could have a domino effect on the broader economy, according to Bob Pinnegar, president and CEO of the National Apartment Association. If tenants don’t pay rent, owners will struggle both to pay employees and to meet their own mortgage obligations, possibly putting their buildings at risk of foreclosure.
According to an analysis from the Department of Housing and Urban Development, almost half of the country’s rental units are owned by individual investors landlords, or so-called “mom-and-pop” landlords, who depend on the money as part of their income.
“It’s a ripple effect of economic destruction that is only going to make it much more difficult for all of us to get back to work,” Pinnegar told FOX Business.
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